It’s The Journey, Not the Exit And Other Lessons Learned About Startup Value Creation

One thing I’ve learned from the 5 tech companies I’ve built over the last twenty years is that building a business is a lot like an experiment. You’re mixing together different ingredients, which together could create something amazing. You go into that experiment knowing what the pieces are, but you do not yet know exactly how they will combine or what they will create. The same is true for startups. As a founder, you’re putting pieces together that you have a theory will work, and will together create greater value than the individual parts. But you just won’t know until you get in there.

Three of the companies I started have exited, and two are still thriving. The good thing about doing this so many times is that I’ve learned more and more about the formula for success. In a lab, it’s clear if you’re on the right track. If you’re not, your experiment can blow up in your face. For an entrepreneur, the signs are a bit more nuanced, which is why it’s important to be clear on who you are holding yourself accountable to. For me, I hold myself accountable to create value for my team, my investors and of course, myself. I track closely against an operating plan and once I identify my value marks, I relentlessly drive to execute and achieve them. Along the way, this is how I think about the startup framework for creating real value:

The Idea – A good idea is worth something! Congrats. This is the easiest step. Lots of people have great ideas. Unfortunately they don’t often act on them. If you do, you are already a step ahead. Is it valuable to have just an idea? It depends on what it is. Certainly the better the idea, the more value you will ultimately create.

The Team – I decisively put “team” as the second step. Regardless of how good your idea is, a one person show doesn’t get very far in building a great business. You need the right combination of experience and expertise around you. If you can recruit the right people to come and join you, now we’re talking value creation. The right startup team is a make it or break value moment and is a mix of culture, unique skills needed to execute, passion and domain expertise.

The Product – There is true value in getting to market, although the first version will probably be just that– a first version that’s the result of hard work and an initial idea on shaping the outcome. Be prepared, your idea will evolve as you more deeply study the market. You can expect to iterate a lot on the market in the near term.

The First Day You Sell It – Now we are talking value. If you can generate revenue, you have now crossed over to successful execution. You have figured out a market need and you’ve delivered. You may have spent years getting to this point, whether it meant getting necessary regulatory approvals, building the right amount of code or investing in distribution. A lot can go wrong on the road to your first sale, which is what makes this such a big milestone.

Cash Flow Break Even – A lot has happened between the last step and this step. You likely have figured out how to finance your business (which sometimes takes years). I would even consider thinking about this step as “positive unit economics.” Either way, your back is NOT against the wall like it has been. Your problems will go from tactical survival to strategic thinking. You will have the ability to start thinking two years out instead of six months. You might even start to think about what other markets and geographies could be in your gunsight. Take a deep breathe. You have achieved a ton for yourself and the team.

The Exit – There is value in not only building a great business but also in creating real liquidity for you, your team and your investors. Exits are the saddest day for me as an entrepreneur. Having been through this a few times, I can conclusively say that the money is great, but everything is different the next day. Some people you love and value working with will move on to different companies, some people will go and launch their own businesses (this is great), and as the founder, you’ll be back to looking forward to what’s next and starting all over again. While everyone is celebrating this great value moment I already know that the best part is the journey, not the exit…….even the money doesn’t really matter to the truest of entrepreneurs.

In between these steps is utter brutal warfare, hard work, some luck and timing. There’s also the primal desire to chew through brick walls and deliver.